By Jacob Shteyman in Canberra

Exceptionally tight rental markets are pushing prices up ever faster and adding to cost-of-living pressures while taking up a record share of workers’ incomes.

Rents climbed 2.1 per cent over the three months to March, housing data group Cotality revealed in its quarterly rental review on Wednesday.

The pace of rental increases has quickened in recent months.

Rents grew by 1.2 per cent in the last three months of 2025 and 0.9 per cent the quarter before that.

Cotality head of research Gerard Burg said rental affordability had deteriorated sharply, with five years of sustained growth adding $202 to the typical household’s weekly rent.

Households were now committing a record 33.1 per cent of their gross median income to rent, up from 26.2 per cent in September 2020.

“Rent growth had moderated through much of 2024 and into mid-2025, but there’s been a lack of supply to meet the demand, which is placing immense pressure on the rental market,” Mr Burg said.

“Until supply catches up meaningfully with demand, rental growth is likely to stay elevated.”

Vacancy rates have fallen from already-low levels over the past 12 months.

Nationally, there are just 1.6 vacant dwellings per 100 rentals, but some capitals are much tighter.

In Adelaide, which recorded a 2.2 per cent rise in rents in the quarter, vacancy rates are at one per cent.

Perth experienced the fastest growth in rents – three per cent over the quarter – and the second-lowest vacancy rate of 1.2 per cent.

“There is little in the current data to suggest conditions are improving,” Mr Burg said.

“When vacancy rates fall to 1.5 per cent or less it leaves renters with very little negotiating power and fewer options. It means renters have to consider alternate options such as share houses, moving to a new area or back in with family.”

Without a significant increase in rental supply, there is unlikely to be any material easing in affordability, he added.

Rising rental costs heap pressure on households already facing higher inflation driven by the Middle East conflict.

The supply shock from the war is also undermining efforts to tackle the undersupply of housing, pushing up the cost of building a home by as much as 10 per cent, according to Westpac, and threatening project feasibility.

NAB’s head of Australian economics Gareth Spence said insolvencies for construction firms were already elevated heading into the crisis.

“Price levels for things like construction inputs, they’re 30 per cent higher than they were pre-pandemic, and we know that there will be some upward pressure on that going forward,” he told AAP.

Sydney remained the most expensive capital city, with a median rent of $824 per week, compared to the median Melbourne rental at $632 a week.

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